Strategic Analysis of Tesla Motors

Tesla Motors became a publicly traded company in 2011, being the second automobile producer to go public after Ford Motors. Tesla Motors aims to provide electric cars that are ‘better, quicker and fun to drive’ than the conventional petrol cars1. Traditionally, the company’s strategic objective sought to promote the acquisition of its high-end technology cars through premiums, which would eventually drive the market faster by ensuring supply of a ‘higher unit volume and lower prices with each successive model’. Today Tesla Inc. has four sets of strategic objectives including the installation of solar roofs and storage products, exploring and venturing into new markets, continuous improvement of autonomous driving software as well as developing a “Tesla Shared Fleet” and apps for car owners to earn money.

09 %, Tesla recorded increase in the cost of sales by 59. 37 % year on year, sequentially cost of sales grew by 14. 6 % in Q2”. 3 Additionally, Tesla’s supplier's net income grew by 26. 27% and subsequently, the net margin grew by 9. It is believed Model E which is under production will be produced at a relatively lower price. 6 According to the production forecast conducted in 2015, Tesla propagates a growth potential of up to $500,000 in 2020 up from $100,000 in 2015. Bargaining power of buyers/customers A set of factors illuminate the reason the customers have a medium power over Tesla Motors. Indeed, the buyers of Tesla cars are driven by the desire to acquire electric cars, while others acquire them because they can own Tesla cars. Mostly, the customers may choose Tesla because the cars are highly fuel efficient and have high quality.

The threat of New Entrants The threats of new entrant are a low force to Tesla Motors. Invariably, this is because the electric cars are only limited to a very small segment of the consumers in the market. Besides, entry into the production of electric cars is defined by the economic privileges that a company has to develop in order to operate. It will require significantly large sums of financial investments to venture into the production of electric cars and compete with Tesla. Besides, the needed technological resources and expertise required to operationalize a similar production line is very rare. However, substitutes that are likely to implicate the electric car market include the increasing trend about the use of bicycles, or even the low-cost car subscriptions.

10 Additionally, lifestyle decisions play another impeccable impact on the adoption of the Tesla Motors. 11 Despite the encroachment of substitutes for the electric car, the Tesla electric car is uniquely designed that any strategic moves that Tesla Motors makes are a concern for any electric car producer. Competitive Rivalry Competitive rivalry force is at medium with prospects of being high in the future. The difficulty posed by entry into the industry and production and adoption of substitutes points to the limited competition that Tesla is likely to face in the future. Nonetheless, the success at Tesla is contingent on the competitive advantage defined by Elon Musk, has access to large financial resources, highly innovative with great zeal in creating and adopting renewable energy.

14 Market Trends: PESTEL analysis The section documents the macroeconomic issues that impact the operations of Tesla Motors. Political and Legal considerations The concept of environmental protection policy has a substantial impact on the industry. Both local and regional governments have employed viable strategies aiming at encouraging production of electric vehicles. 15 The innovation of hybrid and electric cars is a top priority for the governments. Tesla wallows in the advantages associated with the increased adoption of renewable energy sources and declining battery costs. The global economic growth projection for 2018 stands at 3. 1%, a projection likely to decline in the coming two years. 19 The US economy is projected to grow at 4. 1% and the European block economic growth projection is 2. 22 Appendix iv is a summary of the declining battery prices over time and projections in the future.

Other economic issues that affect the leverage level of Tesla may include poor manufacturing and operational performance where the company has been posting losses in the last two quarters where 659,978 and 327,306 for the period ended March 31st and December 31st was reported. 23 Additionally, the principal debt as of December 31st, 2017 is $10. 17 billion. Subsequently, the credit rating of Tesla was downgraded from B2 to B3 by Moody. Moreover, the strategic investment on the Solar Roof and the Gigafactory are substantial efforts to keep production costs low, investments that aim at fostering business sustainability and the use of environmentally friendly vehicles like the Model 3. Sociocultural considerations The operations of Tesla are influenced by social conditions and trends directly adduced to customers, employees, and investors.

Major social issues in the macro environment suppose an opportunity for growth. These include the dominance of low carbon lifestyles, escalating preferences for consumption of renewable energy as well as distributing wealth across markets. 27 It is possible that these issues are positive assurances for Tesla to secure its long-term financial stability. 17 billion at the period ended Dec 31, 2017. Social • Preference for low carbon cars • Preference for renewable energy • Wealth distribution across market - Technological • Dynamic technological growth • Artificial intelligence • Online mobile systems • Dynamic technological expansion Ecological • Growing concern over Carbon dioxide emissions • Climatic change is an opportunity • Stringent waste disposal regulations. - Legal • Increased government regulations on standards of production in the automobile industry. Substitution effect • No immediate substitutes - Supplier power - • Rising supplier prices Buyer power • Low switching costs • Limited purchase volumes Competitive edge • Human competence, Elon Musk • Lithium ion Gigafactory • Autonomous driving capability - Recommendations i.

The marketability of the Tesla Motors is contingent on the assimilation of the climate change concern by the global economies. The company should consider diversifying its supply systems to ensure a steady supply and eventual continuity in production. It can be done by abolishing single sourcing supplier which is associated with weak bargains. This could be complemented with the policy on sales which has significantly impacted on the dealership of the cars. Tesla should harmonize the sales policy according to the state statutes. Such a strategy could help expand its global presence. html> [Accessed 1Sept. Crutsinger M. July 27, 2018. U. S. com. Electric car tax credits & incentives for 2018. Available at <https://www. energysage. com/electric-vehicles/costs-and-benefits-evs/ev-tax-credits/> [Accessed 1 Sept. bloomberg. com/news/articles/2018-09-04/tesla-hits-one-month-low-on-mercedes-car-news-negative-calls> [Accessed 4 Sept 2018].

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